Tax credits are much like credits you get from a store. You use the credit to reduce the amount of the tax you owe. Tax credits are more valuable than deductions because they directly reduce the amount of tax you owe, rather than reducing the amount of income that is taxed. Also see Deductions, Non-refundable credits and Refundable credits.

These are expenses the IRS allows you to subtract from your taxable income. If you have taxable income of $30,000 and deductions of $3,000, then you would figure how much tax you owe on the difference - $27,000. Even if you don't itemize, the IRS allows you to deduct alimony payments, capital losses, moving expenses, business losses, and deductibel IRA and Keogh contributions. If you have more deductible expense such as medical costs, mortgage interest, state and local taxes, employee busines expenses or charitable contributions, you must itemize them to use the deductions.

A person, other than the taxpayer or spouse, who entitles the taxpayer to claim a dependency exemption.To qualify the person must meet all five tests: 1. Relationship or member of household test 2. Citizenship test 3. Joint return test 4. Gross income test 5. Support test

This is a deduction you are allowed for the wearing away and expensing over time of such items as office equipment, vehicles, buildings and furniture. For tax purposes, the IRS determines the amount of time such material is expected to last, and you depreciate, or spread the cost of, the asset over its estimated useful life rather than deducting the entire cost in the year you got it.

This allows tax refunds to be deposited directly to the taxpayer's bank account. Direct Deposit is a fast, simple, safe, secure way to get a tax refund. The taxpayer must have an established checking or savings account to qualify for Direct Deposit. A bank or financial institution will supply the required account and routing transit numbers to the taxpayer for Direct Deposit.

Includes wages, salaries, tips, and net earnings (if self-employed). It also includes any other income received for personal services. Do not count investment income such as dividends and interest as earned income.

This savings plan was created in 1998 so that parents could make nondeductible contributions to an account for a child under age 18. The program is technically not a retirement plan. It is a trust or custodial account for the child, who is designated as the beneficiary of the account. The child will be able to make tax free withdrawals from the account to pay for qualified higher educational expenses. There are income limits on who may open an Education IRA and only $500 a year may be put in the account.

The transmission of tax information directly to the IRS using telephones or computers. Electronic filing options include (1) TeleFile using a touch-tone telephone, (2) Online self-prepared using a personal computer and tax preparation software, or (3) using a tax professional. Electronic filing may take place at the taxpayer's home, a volunteer site, the library, a financial institution, the workplace, malls and stores, or a tax professional's place of business.

The Authorized IRS e-file Provider that originates the electronic submission of an income tax return to the IRS. EROs may originate the electronic submission of income tax returns they either prepared or collected from taxpayers. Some EROs charge a fee for submitting returns electronically.

Quarterly tax payments you make to the IRS if the amount you pay through paycheck withholding is not enough to cover your annual tax liability. This system generally is used by persons who get a lot of income from sources other than their paychecks, such as interest or dividend payments or income from a second, freelance job.

Free from withholding of federal income tax. A person must meet certain income, tax liability, and dependency criteria. This does not exempt a person from other kinds of tax withholding, such as the Social Security tax.

Amount that taxpayers can claim for themselves, their spouses, and eligible dependents. There are two types of exemptions-personal and dependency. Each exemption reduces the income subject to tax. The exemption amount is a set amount that changes from year to year.

Amount that taxpayers can claim for themselves, their spouses, and eligible dependents. There are two types of exemptions-personal and dependency. Each exemption reduces the income subject to tax. The exemption amount is a set amount that changes from year to year.

Amount that taxpayers can claim for themselves, their spouses, and eligible dependents. There are two types of exemptions-personal and dependency. Each exemption reduces the income subject to tax. The exemption amount is a set amount that changes from year to year.

The price an item would sell for, assuming the buyer and seller both have reasonable knowledge of the item's worth and are not under pressure to buy or sell. To determine FMV, it is common to compare other similar properties sold near the same time as your property. Also called True Market Value or Current Market Value.